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A small German-speaking Alpine republic which struggled to find its own national identity before 1945, and which since then has been characterized by a strong inclination towards consensus-oriented politics.

The interwar years (1918–38)

The Austria that emerged after World War I contained only around 14 per cent of the territory of Austria-Hungary. Chancellor Renner (1918–20) sought to stabilize the new republic through social legislation, while at the same time expressing the wish for an eventual link (Anschluss) with Germany. Despite this, social unrest was a feature almost from the beginning. The state was weak, mainly as a result of a heavy debt burden from the war. It was thus unable to cope with the impact of the demobilization of troops, which resulted in large-scale social dislocation. Matters were made worse by the loss of important economic areas such as the industrial Czech lands, and of access to the sea through Trieste. An entirely new domestic economic structure had thus to be created.

The federal Constitution became effective on 1 October 1920. In that year, the reformist Social Democratic Party of Austria (SPÖ) lost power to a bourgeois party coalition. Backed by a conservative, inefficient bureaucracy, the government failed to stabilize the economy, whose collapse was prevented by a series of credit agreements, mainly with the US. At the end of a period of international economic recovery, industrial production was still only at 80 per cent of the prewar levels, while unemployment remained at 25 per cent. In view of the economic and social difficulties, political differences became increasingly marked during the 1920s, and led to an upsurge in political violence between supporters of the Communists, Social Democrats, and Fascist organizations. The collapse of Austria's largest bank in the wake of the Great Depression, the Östereichische Creditanstalt für Handel und Gewerbe (May 1931), appeared to many a final admission of defeat for the republic. In response, changes to the Constitution increased the executive powers of the President.

Authoritarianism and Nazism (1930s–1945)

Political polarization continued unabated and in 1932 the local and state elections were won by the Austrian Nazi Party, which was under the tutelage of its German sister party. In response, Dollfuss dissolved parliament and instituted a dictatorial regime, based on a People's Front. His Fascist policies (authoritarianism, conservative moral values, corporatism rather than democracy), which led to a brief civil war against the socialists in early 1934, were continued by Schuschnigg, who was increasingly unable to resist domestic and German pressure towards union with Germany after Mussolini had accepted it in principle in 1936.

Under Seyss-Inquart, Austria was finally ‘invited’ to join in a union with Germany, and on 12 March 1938, German troops marched into Austria to consummate the Anschluss. Hitler was jubilantly received into his native country, while membership figures for the Nazi Party, which surpassed those in Germany, suggest that support for the Third Reich was, indeed, very high. The levels of anti-Semitism had also been remarkably similar in both countries. As World War II dragged on, and Austrian cities were bombarded, while Austria itself was increasingly run by a German administrative elite, many people became disillusioned, and resistance movements began to form.